Abstract

Using the URL or DOI link below will
ensure access to this page indefinitely

Based on your IP address, your paper is being delivered by:

New York, USA

Processing request.

Illinois, USA

Processing request.

Brussels, Belgium

Processing request.

Seoul, Korea

Processing request.

California, USA

Processing request.

If you have any problems downloading this paper,please click on another Download Location above, or view our FAQFile name: SSRN-id2258129. ; Size: 239K

You will receive a perfect bound, 8.5 x 11 inch, black and white printed copy of this PDF document with a glossy color cover. Currently shipping to U.S. addresses only. Your order will ship within 3 business days. For more details, view our FAQ.

Quantity:Total Price = $9.99 plus shipping (U.S. Only)

If you have any problems with this purchase, please contact us for assistance by email: Support@SSRN.com or by phone: 877-SSRNHelp (877 777 6435) in the United States, or +1 585 442 8170 outside of the United States. We are open Monday through Friday between the hours of 8:30AM and 6:00PM, United States Eastern.

Relative Value Health Insurance: The Behavioral Law and Economics Solution to the Health Care Cost Crisis

With the Patient Protection and Affordable Care Act (ACA) set to sharply increase access to medical care, the problem of rising costs moves center stage in health law and policy discussions. “Consumer directed health care” proposals, which provide patients with financial incentives to equate marginal costs and benefits of care at the point of treatment, demand more decision making ability from boundedly-rational consumers than is plausible. Proposals that seek to change the incentives of health care providers threaten to create conflicts of interest between doctors and patients. New approaches are desperately needed.

This article proposes a government-facilitated but market-based approach to improving efficiency in the private market for medical care that I call “relative value health insurance.” This approach focuses on the “choice architecture” necessary to enable even boundedly-rational patients to contract for the efficient level of health care services through their health insurance purchase decisions. It relies on using comparative effectiveness research, which the ACA funds at a significant level for the first time, to rate medical treatments on a scale of 1-10 based on their relative value, taking into account costs and expected benefits. These relative value ratings would enable consumers to contract with insurers for different levels of medical care at different prices, reflecting different cost-quality tradeoffs.

The article describes both the benefits of the approach and the impediments to its implementation. It concludes with a brief discussion of how the principles can also be applied to public health insurance programs.